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AB InBev SABMiller Spells Helluvva Big Beer Deal

Image: AB InBev SABMiller Spells Helluvva Big Beer Deal

Carlos Brito, chief executive of Anheuser-Busch InBev. (REUTERS/Yves Herman)

By    |   Thursday, 03 Mar 2016 07:16 AM

The world's top brewer Anheuser-Busch InBev has agreed to sell SABMiller's stake in China's leading beer maker to the local partner for $1.6 billion as part of a mega-merger between the giants, news agency AFP reported.

China Resources Beer will buy the 49 percent stake in Snow Breweries, its joint venture with Britain's SABMiller, it said in a statement to the Hong Kong stock exchange, where it is listed.

It said the deal would go through "as soon as practicable" after AB InBev, a Belgian-Brazilian company, takes over SABMiller.

AB InBev announced in November last year it would buy SABMiller for $121 billion – the third largest acquisition in history – creating a juggernaut brewing three times as much beer as its nearest rival.

Analysts said the sale appeared aimed at persuading Chinese regulators to sign off on the giant deal. AB InBev aims to complete the SABMiller takeover by the end of this year, and said last month the plans were on track.

"After the acquisition deal between AB InBev and SABMiller, their market share in China would have exceeded 40 percent. This may not pass the antitrust survey by the ministry of commerce, so AB InBev had to sell the stake," Guotai Junan Securities analyst Song Tao told AFP.

The Snow Breweries venture, set up in 1994, has a market share of around 24 percent in China and operates 98 plants across the country according to SABMiller, which describes the venture's "Snow" product as the world's biggest beer brand.

AB InBev already has a presence in China with a 15.9 percent domestic market share and 39 beverage plants as of 2014, according to the company.

But analysts said that shedding the Snow Breweries holding is a setback for the newly formed entity in the world's biggest beer market, while China Resources Beer – part of the massive conglomerate China Resources – loses a strong foreign partner, leaving it weak in the premium segment.

"Losing the Snow Breweries stake has a huge impact on the foreign brand because it will lose the price negotiation advantage it used to have with raw material suppliers and the scale-of-production advantage from the factories," Stacey Yu, an analyst at consultancy Business Connect China, told AFP.

Competition is expected to intensify in the Chinese beer market, where growth is slowing in the face of economic headwinds, analysts said.

"Without one company dominating the market and enjoying increased pricing power, the beer market will remain fiercely competitive," said Song of Guotai Junan Securities.

AB InBev has acquired or formed partnerships with a number of leading Chinese brewers and doubled its China business in 2006 by acquiring Fujian Sedrin Brewery.

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The world's top brewer Anheuser-Busch InBev has agreed to sell SABMiller's stake in China's leading beer maker to the local partner for $1.6 billion as part of a mega-merger between the giants, news agency AFP reported.
ab inbev, sabmiller, beer, deal
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2016-16-03
Thursday, 03 Mar 2016 07:16 AM
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